AllianceBernstein Removes Derivatives From Active ETF Filings

by: Shishir Nigam

AllianceBernstein, who had previously filed with the SEC requesting exemptive relief to launch actively-managed ETFs, has amended their applications to remove the usage of derivatives from the planned funds. It have joined the growing list of applicants who have modified their applications to state explicitly that their funds will not utilize derivatives. These moves have been in response to the SEC’s investigation into derivative usage in ETFs that was announced in March 2010.

AllianceBernstein filed the amended application with the SEC on Dec 28th, 2010. While the initial application didn’t make any note of the usage of options, futures and swaps, the amended application specifically states that these instruments will not be used in any of the planned funds. In the initial filing submitted in July, AllianceBernstein indicated that its “initial fund” will be called the AllianceBernstein Active ETF – U.S. Quantitative Strategy. It will look to achieve long-term capital growth by investing in US large-cap equities through the use of a quantitative approach. The advisor has also sought relief allowing managers to invest in other funds as part of the portfolio strategy.

The exemptive relief process can take anywhere from 6 months to 2 years. It has been 6 months since AllianceBernstein filed its initial application. Van Eck Global, another major fund manager that filed for actively-managed ETFs, had to wait a full 2 years before receiving exemptive relief from the SEC. In 2010, the SEC sat on my relief applications, resulting in frustrating delays for the product development pipelines of many issuers.

Disclosure: No positions in above-mentioned names.

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